S&P Pioneers New Approach for the Next Generation of Style Indices

Method for Constructing Pure Style Indices Receives U.S. Patent

PR Newswire

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NEW YORK, Oct. 13 /PRNewswire/ -- Reflecting the latest advances in style related investment research, Standard & Poor's, the world's leading index provider, announced today that it will introduce new factors for its U.S. style indices during the fourth quarter of this year. Standard & Poor's next generation of growth/value style and pure style indices will be based on an extensive review of ten years of recent academic literature, and subsequent time-series and cross-section analysis.

"In order to effectively capture changes in financial theory, accounting standards and investment sentiment, a relevant and efficient style benchmark should refresh its factors every 5-10 years," explains Aniket Ullal, Senior Director at S&P Index Services. "The introduction of new factors such as momentum to calculate the S&P Style and S&P Pure Style Indices will reflect the new way that investors think about style."

The next generation of style indices from Standard & Poor's will continue to be based upon its existing methodology structure but will use six factors to determine stock level style scores, rather than the seven used previously. In addition, the factors used to determine growth and value will also be refreshed (see table below). The remainder of Standard & Poor's style framework, such as the creation of style baskets and construction of indices from those baskets, will remain unchanged.

Old Factors New Factors ----------- ----------- Growth Growth ------ ------ Sales growth Sales growth Earnings growth Earnings change to price Internal growth rate Momentum

Value Value ----- ----- Sales to price Sales to price Book to price Book to price Cash flow to price Earnings to price Dividend yield "Standard & Poor's U.S. Style index solutions address two distinct needs," adds Ullal. "The first is for exhaustive style indices that can effectively form the basis for index funds and derivatives. The second is for narrow, pure-style indices that provide a pure style return series, and serve as the basis for style-concentrated investment vehicles."

A whitepaper detailing the new approach has been published to: www.indexpublications.standardandpoors.com . For more information on Standard & Poor's style indices, please visit: www.styleindices.standardandpoors.com .

About Standard & Poor's Index Services

Standard & Poor's Index Services, the world's leading index provider, maintains a wide variety of investable and benchmark indices to meet an array of investor needs. Over $1 trillion is directly indexed to Standard & Poor's family of indices, which includes the S&P 500, the world's most followed stock market index, the S&P Global 1200, a composite index comprised of seven regional and country headline indices, the S&P Global BMI, an index with approximately 11,000 constituents, and the S&P GSCI, the industry's most closely watched commodities index. For more information, please visit www.standardandpoors.com/indices .

About Standard & Poor's

Standard & Poor's, a subsidiary of The McGraw-Hill Companies (NYSE: MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research and data. With offices in 23 countries and markets, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for nearly 150 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit www.standardandpoors.com .

SOURCE Standard & Poor's

2009-10-13 09:30:00